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Factors Influencing Organizational Buying
Some economists and marketers argue that the primary factors are primarily economic. Hence, the lowest price or cost is the sole criterion for selecting providers. On the other hand, others go so far as to declare all corporate purchasing to be an emotional or non-rational act since it includes humans, making it impossible to maintain logic or objectivity.
As a result, some providers believe that having solid personal ties or the capacity to win over consumers through lures and personal charms will give them an advantage over competitors. Both points of view are extreme and reflect only a narrow vision of reality. A balanced perspective must acknowledge that organizational clients respond to economic and personal reasons. When supplier proposals are almost identical, organizational clients have little need to rely on economic criteria.
Remembering our Pragati scenario, while any brand of cooler might match the organizational goal, personal characteristics played a significant influence. If rival products/brands differ significantly, organizational buyers may be more concerned with economic reasons. Webster and Wind have offered a thorough assessment of influences. They classified the numerous effects as environmental, organizational, interpersonal, and individual.
A balanced perspective must recognize that organizational customers respond to economic and personal reasons. If there is a close resemblance in supplier offerings, organizational clients have a limited foundation for solely economic criterion. Remember our Pragati case? Because any brand of cooler may achieve the organizational goal, personal characteristics play a significant influence. If competing products/brands differ significantly, organizational buyers may give more attention to economic factors. Webster and Wind have presented a detailed overview of impacts. They have classified the numerous factors into four categories: environmental, organizational, interpersonal, and individual.
Similarly, continuous power shortages in several Indian states have precluded the deployment of advanced automatic elevators in commercial and residential buildings. Despite their availability, people prefer manually operated elevators with shutter-type doors. An industrial marketer should be aware of environmental aspects influencing customer behavior and fine-tune their marketing plan accordingly. Failing to recognize the factors may result in ineffective attempts.
During the discussion of the features of organizational buying behavior, it was said that organizations might differ from one another owing to objectives, processes, organizational structure, systems, and technology: It is critical to recognize the impact of such organizational characteristics on purchasing behavior. Sarin's research on four massive industrial organizations in India found significant changes in the Indian enterprises' purchasing structures and procedures. Among these were −
Innovativeness in Organisational Buying
The emergence of the "Buyer" as an Important Member of the Buying Centre
Decentralization and Centralization of materials
Computerization of Organizational Buying
Separate Buying for Specialized Jobs
Concern to Prevent Unhealthy Transactions between buyers and marketers
Recognition at the top level
The Interpersonal Factors
Corporate purchasing is a collaborative effort. The notion of a buying center emphasizes the functions that various members of the purchasing organization may play in the purchasing decision-making process. Because of the diverse positions, authority, empathy, and persuasiveness of the buying center members, the scenario gets more complicated. This may result in disputes. Though challenging, an organizational marketer may strive to become acquainted with the internal dynamics of a customer organization's purchasing process. Sheth has identified four methods that organizations employ to resolve conflicts −
This entails gathering information and deliberating for extended periods.
An attempt is made to persuade dissident members to lessen the relevance of the criteria they are utilizing in favor of greater overall attainment of organizational objectives.
A common cause of conflict is fundamental differences in purchasing aims and objectives. This is frequently true for first-time buyers. In such a case, disagreement is handled by negotiating rather than modifying the relative importance of the persons involved's purchasing goals or aims. In this case, a single party is given autonomy in the current circumstance in exchange for some favor or promise of reciprocity in future choices.
If the first three fail, the parties may turn to harmful techniques and cast aspersions on disagreeing members.
The Individual Factors
Regardless of the environmental, organizational, and interpersonal elements, it must be recognized that individuals, not organizations, ultimately make purchasing decisions. Each member of the purchasing center has a distinct personality, a particular set of learning experiences, a specific corporate job to fulfil, and perspectives on achieving both personal and organizational goals best. An industrial marketer should be aware of the various purchasing perceptions and their impacts on the final purchasing decision. Understanding 'perceived risk and its management' at the individual level may be vital in recognizing individual impacts on organizational purchase behavior in specific scenarios.
The Perceived Risk
Newall characterizes decision-making as a risk-taking activity, and organizational buyer behavior is seen in this light. According to Newall, the characteristics that influence risk behavior include −
Characteristics of the Purchase Problem
Some factors related to purchasing problems are −
Size (rupee value) of the expenditure
Degree of novelty contained in the type of buying task
Degree of product essentiality
Factors provoking purchase
Characteristics of the Buyers
This includes −
Buyer's level of general self-confidence
Buyer's level of specific self-confidence.
Buyer's experience in playing the purchase role
Buyer's purchase history, i.e., of buying within a particular product area
Buyer's degree of technical and professional affiliations
Some factors affecting the risks at the level of the company are −
The size and financial standing of the organizational customer
The degree of decision centralization
The degree of decision routinization
The Management of Perceived Risk
An individual visualizes two types of risk −
Performance risk -product may fail to come up to the performance standards
Psychological risk-fear of being held responsible or accountable for other members' decisions.
Both performance and psychological risk can be linked to the uncertainty about the result and the degree of the repercussions of making the wrong option. Individual decision-makers are driven by a strong desire to lower the degree of risk in their buying decisions. To reduce the danger, research proposes the following kinds of action −
External Uncertainty Reduction (e.g., visit supplier's plant)
Internal Uncertainty Reduction (e.g., consult with other buyers)
External Consequence Reduction (e.g., multiple sourcing)
Internal Consequences Reduction (e.g., consult with the company's top management)
Organizational buyers can also lower risk in a purchasing situation by relying on known suppliers. This type of source loyalty is a straightforward way to reduce risk. A similar circumstance is putting orders on 'high' credibility image providers in a new buying environment. In specific buying scenarios, an industrial marketer must endeavor to understand and predict the regions of perceived risk and its minimization by various buying center members. The information may aid them in building efficient sales tactics.
Economists and marketers argue that corporate purchasing is primarily economic, while others argue it is an emotional or non-rational act. Some providers believe that having solid personal ties or the capacity to win over consumers will give them an advantage over competitors. Webster and Wind have offered a balanced perspective acknowledging that organizational clients respond to economic and personal reasons.
When supplier proposals are almost identical, organizational clients have little need to rely on economic criteria. However, when rival products/brands differ significantly, organizational buyers may be more concerned with economic reasons. Personal characteristics played a significant influence, while environmental, organizational, interpersonal, and individual influences also played a significant role.
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